ETF Expert

Chile has copper… lots of it. The iShares MSCI Chile Fund (ECH) is up nearly 30% year-to-date.

Russia has oil… and controls quite a bit of it. The Market Vectors Russia ETF (RSX) is up an astonishing 40% in 2009.

Brazil has just about everything form iron ore to gold to coffee to soy. Its agricultural exports to the world… even during the heart of a global financial crisis from 4/2008-3/2009… catapulted an astonishing 16+%. It's no wonder that the iShares Brazil Fund (EWZ) has appreciated 37% through "Quatro" De Mayo.

In spite of the compelling turnaround in the U.S, S&P 500 SPDR Trust (SPY) and MSCI EAFE Europe-Austral-Asia Fund (EFA), conspicuous consumption is more prevalent in the developed world whereas the emerging nations are busy harvesting their natural resources. It follows that developed nations are trying to get back to the starting line, while developing nations that are materials/energy focused are rocketing forward. It definitely reminds one of the old bumper sticker, "The one with the most toys… wins!"

Well, when it comes to the world of investing in the securities markets, there's a bias forming in favor of the producing nations. More specifically, if you've got "stuff" to sell (a.k.a commodities), the world's going to be buying.

Prior to a more diplomatic, 21st century approach to international relations, one country might simply have pillaged until its heartland was content. Why buy what you could simply take? But short of Russia's little invasion of its neighbors in 2008, there's not a lot of resource stealing that's taken place by the majors (i.e., U.S., Euro-zone, China, etc.).

In fact, China is in the enviable position of acquiring stakes in materials and energy producing corporations around the world, while having the luxury of using a weak Chinese yuan to manufacture the world's goods. Not surprisingly, China too is making the most of 2009 with different ETFs up anywhere from 12%-25%.

Of course, what if you worry about the 8 weeks of nearly unchecked momentum? Can emerging market standouts really continue to surge… as if there were no evidence of shaky consumers in Japan or the U.S.? Is the Great Recession effectively over?

Long term, I simply can't argue against the logic of investing in the producers as opposed to the consumers. In the shorter run, however, something's going to shake the shiny, happy, new-found bullishness.

Nevertheless, when that pullback does come, do you invest in the ingenuity of the U.S. or the precision of Japan? Yes… but it might be a smaller part of your equity portfolio than ever before.

Instead, there are investments that might intrigue a producer-minded investor. For instance, what does a powerhouse like China do with the iron, copper and steel it now owns as a part of its relationships with Brazilian and Australian materials makers?

The Powershares Emerging Markets Infrastructure Fund (PXR) tracks about 60 companies that are involved with engineering, construction machinery, construction materials, heavy electrical equipment and steel. Countries that are building internally need the corporations in the Emerging Markets Infrastructure Fund (PXR).

It may be a tad expensive at 0.75%. And it has only been around since November… so the volume is noticeably light. Still, you're getting diversification across emergers from China to Brazil to Indonesia to South Africa at a price-to-earnings multiple as low as 8. It is certainly giving the investor more of what he/she is probably looking for than what one finds in the iShares S&P Global Infrastrcuture Fund (IGF).

If you'd like to learn more about ETF investing… then tune into "In the Money With Gary Gordon." You can listen to the show "live" or via podcast or on your iPod.

Disclosure Statement: ETF Expert is a web log ("blog") that makes the world of ETFs easier to understand. Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.